Formal request to ESMA for technical advice on the review of Commission Directive 2007/16/EC on UCITS eligible assets

ESMA has received a formal request from the EC to review the Commission Directive 2007/16/EC on UCITS eligible assets. The objective is to assess the implementation of the Eligible Assets Directive across EU member states, identify any discrepancies, and provide recommendations for revising the directive to align it with market developments.
The UCITS Directive is a crucial framework for managing and marketing mutual funds to retail investors in the EU, and its success relies on being perceived as secure and well-regulated. The Eligible Assets Directive specifies the types of assets in which UCITS can invest to ensure they meet obligations such as liquidity and net asset value calculation.
ESMA is tasked with evaluating the implementation of the Eligible Assets Directive and identifying any discrepancies among member states. It is also required to provide recommendations for enhancing legal clarity and uniformity by examining the benefits of linking definitions and concepts to other EU regulations. This analysis includes regulations like MiFID II, EMIR, the Benchmark Regulation, or MMFR.
ESMA should propose clarifications on key definitions and assessment criteria for asset eligibility. It is also expected to evaluate the risks and benefits of UCITS investing in asset classes that are not directly investable, such as derivatives and financial indices. ESMA will conduct a data gathering exercise with NCAs and market participants to understand UCITS exposures to different asset categories and potential risks for retail investors.
ESMA’s technical advice will consider underlying market characteristics such as valuation availability, liquidity, and safekeeping. It will provide the EC with up-to-date data on the size of asset classes in the UCITS market. ESMA is requested to recommend necessary changes at both the legislative (Level 1) and regulatory (Level 2) levels.
The technical advice aims to preserve and strengthen the functioning of the UCITS framework, protect investor interests, and maintain the quality of investment products for retail clients.